RENT-TO-BUY: LESS MONEY, MORE HOUSE

RENT-TO-BUY: LESS MONEY, MORE HOUSE

Despite what at first glance appears to be very sluggish behaviour, the property world is also changing. Newer models make it possible to participate in the world of investment property through crowdfunding. However, if you are looking for your own home and realise that you can only finance a parking space in your dream location due to rising prices and a lack of savings, we present you with a new concept. 

Crowdfunding is a well-known alternative to buying a house, but is it really the solution? Sharing a home with as many buyers as possible may harbour a great deal of incalculable potential for conflict, doesn't it? A good opportunity to acquire property if your wallet doesn't have the necessary change, but there are also other concepts.

RENT-TO-BUY

In other words, renting to buy offers the opportunity to move into your future home today, even if you have little equity. Providers such as PropertyCaptain and Houzy make it possible to start the process of buying your dream property today. This involves drawing up a leasing contract with the right to purchase your dream property at a later date. Just as if you were buying a car. With these providers, the right to buy is normally set at 5 or 10 years. 

THE ADVANTAGES OF A SMALL BANK ACCOUNT

The rent-to-buy model has a number of advantages. In Switzerland, you must have at least 20% of equity to buy your own home. This is extremely difficult for many earners, which is why Switzerland is one of the countries with the lowest home ownership rate of just under 40%. Using the rent-to-buy method, however, you only need to show 5% of equity. Another advantage lies in the agreement of the purchase price. This is fixed today (plus 1.5% interest per year of the lease). If you are convinced that property prices will rise faster than this 1.5% in the next 5-10 years, you can already benefit from rising property prices today. You should also consider the savings advantage of moving in today. All future expenses will be made for your own home, which is why no money is lost, as is the case with renting a flat. 

RENT-TO-BUY AS A DEVIL HIDDEN IN AN ANGEL'S DRESS?

The providers of such contracts would of course never communicate this, but you should also be aware of the disadvantages of this type of financing. Assuming that your poor-swallow trend continues over the following years, you will incur some costs. The transfer tax, fees for the entry in the land register and part of the down payment for your dream home. This part may correspond to 3% of the total value of the property. Psychologically, you may also be under pressure to save up a further 15% of your property over the next few years. Nonetheless, this is definitely an option to consider and can be advantageous in the current market environment with rising property prices. I only ask one thing of you - be sure that you can set aside the necessary equity over the coming years. Otherwise, the car park you could originally afford will turn into a bonfire under the bridge. 

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